Capital Market

Hang Seng BeES

Alex K. Mathews, Research Head

Indian investors can now invest in China through Hang Seng BeES. Investors who track global markets and want to invest in the growth of Hang Seng Index, which during the recession period remained a source of interest among investors around the world, could avail this opportunity. Hang Seng BeES is India’s first international ETF which is listed on NSE. The fund is promoted by Benchmark Mutual Fund and tracks Hang Seng Index that comprises of 42 companies including China Mobile, Bank of China, HSBC Holding, Cathay Pacific Airways etc representing around 60% of the total market capitalization of Hong Kong stock exchange. The asset allocation in this fund will be 90-100% in securities which constitutes of Hang Seng Index and 0-10% in money market instruments, gilt-edged securities, bonds, cash at call etc. This fund is designed to take care of foreign exchange conversion and investors in India can invest in the home currency through the demat and trading accounts. As it is a passive fund, it will try and replicate the returns of the Hang Seng Index rather than actively manage and surpass it.

On the technical side, Hang Seng and Nifty has a positive correlation which means that movement in Hang Seng Index will have its effect on our Nifty as well. The one year correlation between Hang Seng and Nifty is 0.96% while the three month correlation is around 0.86%.

Specifications of Hang Seng BeES

The units of Hang Seng BeES are listed on the National Stock Exchange and its units can be purchased or redeemed in a minimum lot of one unit and in multiples thereof. There is no entry load and exit load which makes it more attractive. As far as the P/E ratio is concerned, it is 18 for Hang Seng Index, and 21 for Nifty while the Dividend yield is 3.25% for Hang Seng Index, and 1.01% for Nifty. The expense ratio of Hang Seng BeES is expected to be 1.5% of weekly net average assets which is a bit high for a passive fund by international standards, but in India the expense ratios tend to be higher.